Germany Should Cut Tax on Energy to Help Switch, BayWa Says

By Mathew Carr -
May 24, 2013

Germany should cut value-added tax
levied on energy consumption to help cut household bills as the
nation transitions to wind and solar generation from fossil
fuels and nuclear, according to BayWa AG. (BYW6)

Reducing VAT to 7 percent from 19 percent would protect
consumers, especially the poorest, until more wind farms and
solar plants are complete and the economy is more energy
efficient, Klaus Lutz, chairman of Munich-based commodities
trader BayWa, said today by phone. “Why do we have a tax
privilege on animal food and not on energy?” he said. “Energy
is one of the vital resources for our society.”

Consumers in Europe’s biggest economy have seen power bills
surge this year after a surcharge they pay for Germany’s
increased use of wind and solar generation jumped 47 percent to
a record. Germany seeks to more than triple the share of
renewables in its power mix by 2050 while phasing out nuclear
generation.

Lutz’s comments come as the Paris-based International
Energy Agency warned today that consumers have borne the brunt
of Germany’s embrace of more expensive renewable energy through
higher utility bills, while large industry has been shielded
from the greater costs.

“For me, the VAT is a quick solution,” Lutz said.
Changing taxes and subsidies in the energy industry will take
longer, he said, declining to specify how the VAT reduction
should be funded.

Voter Resentment

The administration of Chancellor Angela Merkel risks voter
resentment in the run-up to the Sept. 22 election if it can’t
curb the “dramatic” price increases, he said.

“There is no clear opinion in our country about what do we
do,” he said. “We as BayWa do not want to leave our core
market. If we had bet only on Germany, we would be in deep, deep
trouble right now and in the future.”

Germany’s renewable energy projects are made profitable by
preferential fees called feed-in tariffs paid to wind and solar
projects and funded by consumers. The EU is in talks with
industry leaders on the best way to continue shifting the bloc
further away from fossil fuels after 2020.

“I don’t care if we have a cap on feed-in tariffs,” Lutz
said. “In the long-term, feed-in tariffs will be cut down to
zero.”

The EU will struggle to expand its authority over the
bloc’s energy system because national law takes precedence and
will continue to do so for many years, Lutz said.

“The tendency will be to reduce the influence of the
European Union,” he said.